Research in Motion - Blackberry Smartphones - Assignment Example

?Table of Contents RIM – Blackberry Smartphone 2 MICRO ANALYSIS 2 a)Demand Factors: 2 a)Supply Factors: 3 b) Market Structure 4 c) Future Potential for market 4 d) Elasticity concept 4 e) Efficient Resources 5 MACRO ANALYSIS 5 i)The economic growth 5 ii) Unemployment 6 iii) Inflation 6 iv) Balance of Payments 6 v) Business Cycle 7 References 8 Appendix 9 RIM – Blackberry Smartphone Research in Motion (RIM) is the maker of the successful line of smartphones popularly known as Blackberry smartphones. They incorporate features like push email, instant messaging and on the go connectivity with the social world. The company grew to become one of the leading smartphone makers in the world, lacking behind only to the Apple’s iphone, Android phones and the Windows based phones. MICRO ANALYSIS a) Demand Factors: The factors that affect the demand for Blackberry greatly vary from country to country since the customer’s preferences and their association with certain brands change based on their perception. According to the study, the share of RIMs worldwide sales of smartphones declined to 14 percent in the period last quarter of 2011 compared to last quarter sales of 20 percent for the same period. On the other hand, Apple’s share remained stable at 16 percent while Android was able to drastically lift its sales almost threefold to about 33 percent. (Miller, 2011) This was mainly due to the fact that the demand for Blackberry devices fell sharply during the last year owing to the success of its competitors. The unprecedented success of Samsung Galaxy S2 coupled by the low prices other Android phones were available in the market; Blackberry’s sales were badly dented. Therefore, the competitors’ factor played a crucial and a significant role in determining the demand for Blackberry devices. The image associated with Blackberry devices is usually more of the young generation of users who are connected to each other on the go, nevertheless, in some parts of the world the same device is viewed more as of a corporate phone which enables the employees to stay in touch with each other no matter where they are. Therefore, this dual perception based on the local taste of consumers has resulted in varied demand for the devices. As more and more youth shift to smartphone devices, the competition will only toughen and with new and cheap competitors emerging from all parts of the world such as ZTE and Huawei from China, Blackberry will have to rethink its strategy to sell high-end phones to elites since now even the middle class wants to buy such phones. Although, the distinctive feature of Blackberry that resulted in high demands initially namely the BBM service has now been overcome by software’s like Whatsapp and Viber which offer similar services free of charge. Moreover, among the customers who were interviewed to inquire about their preference for buying a new phone in the next 90 days, only 6 percent stated their inclination towards Blackberry devices. Their main comment was that Blackberry has lost its competitive edge both in its shape and appeal. They complained that the bulkiness of the set and the loss of its distinctive feature have contributed to this disliking in the recent past. (Evan, 2010) a) Supply Factors: In comparison to this, the supply of Blackberry devices has increased in the past year since the analysts predicted future growth. Factors affecting supply are the demand itself and the price of the device. Other important factors include the technology and raw materials. Materials required for such a device are very unique and expensive, for example, cameras, LCD screen and processors. Therefore, being a company located in Canada, it has generally good access to the most essential raw materials although at times it has to import these materials from other manufacturers who have firm control over these resources in various parts of the world. Blackberry also holds an advantage since RIM is the sole manufacturer of its devices, therefore, they pay special attention to its hardware and the rate of support calls for Blackberry devices stand at only 3% which is the lowest amongst all the smartphone manufacturers. (Hall, 2011) Finally, since this is a high technology market, there has to be constant innovation and advanced hardware and software being used in the manufacturing of Blackberry in order to ensure customers are willing to pay above the market price. b) Market Structure The smartphones market is highly competitive since there are buyers and sellers who are present and the competition is only increasing as more and more local players are emerging. For Blackberry, major competitors include Android devices (Samsung, LG, and Motorola), Apple’s Iphone and Nokia’s Symbian phones. These companies have already established themselves and are giving tough competition to Blackberry expansion plans. There is complete availability of information to the consumers and they can chose from a wide variety of models of various companies (examples: Blackberry Torch, Bold, Curve; Samsung Galaxy S, S2, Nexus; Apple Iphone3, 4, 4S and so on). This market provided a great opportunity for price competitiveness since companies could lower prices to attract more consumers and gain market share. c) Future Potential for market Blackberry can gain advantage from its market structure by enabling lower prices for greater value-added output. In order to ensure profits in the future, they should invest in R&D and carry out consumer insight surveys to tackle the trends in customer preferences and tastes. By doing so, they will be able to capitalize on the new markets even before their competitors are aware of it. Therefore, the first mover advantage has to be exercised if they have to sustain their position or improve it further by either coming up with new cheaper models, or coming up with a completely new offering, such as holographic smartphone. There is always room for innovation and exercising comparative advantage based on the available resources. d) Elasticity concept The market for smartphones has been growing at an immense pace and, hence, the demand for Blackberry’s smartphones is also surging at a similar pace. This has changed their elasticity from highly elastic to less elastic in most of the cases. The product is still a want and not a need and is priced highly; therefore, it does not cater to lower socio-economic classes. Teenagers tend to have an inelastic demand for Blackberry and, hence, have an inclination to buy new phones on an average yearly basis. Thus, Blackberry devices can be priced at high end of the product price spectrum when catering to teenagers. In developed countries it lies on the inelastic frontier where higher prices for packages or services can be charged whereas in developing countries, higher prices can lead to reduced competitiveness since local manufacturers will be able to penetrate their products at much cheaper prices. Operating in such a competitive market, it has to take special care of complementary and supplementary goods since a decrease in their prices will only benefit Blackberry. They would have to keep an eye on how the different related products behave and then set a price accordingly to encourage sales of the product. e) Efficient Resources It presently is using its resources effectively and efficiently and equips its phones with long battery life times compared to its rivals. There is little wastage of resources and they make sure that all the raw materials are put to the right use. MACRO ANALYSIS i) The economic growth The economic growth plays an equally important part in the growth of the smartphones industry. The US industry grew by a sound 2.9%, as estimated by Economists. (Schnurr, 2011) This would affect the demand for the luxury product and help sustain its sales as the country is recovering from the negative effects that slowed down the economy amid the Japanese Tsunami. It is seen to grow at a modest 2.1% for 2012, which will indeed contribute towards positive growth for both the industry and for Blackberry in general. (Schnurr, 2011) ii) Unemployment On the other hand, unemployment figure stood at an average 8.7% for 2010 amidst the strong recession effects being still felt. As countries are trying to recover from the slow economic growth, Blackberry also has seen slowing sales in the last two quarters which can be attributed to these factors. As inflation gets down and becomes controlled, the prices can become relatively cheaper for consumers to buy since their purchasing power will increase and they will be able to improve their standards of living through such luxury products. It will be a test of time to wait and see which company recovers first and is able to offer its customers a better offering at a better value. (CIA World Factbook, 2012) iii) Inflation There are several external pressures as well that affect the sales, hence, the market share of Blackberry. Inflation will play a critical role in determining the pricing strategy for Blackberry and other related products. In the US, inflation stood at around 2.93% for January 2012, which was below the average for the last year. For developing countries, the inflation rate averaged to about 5.6% in 2011. (CIA World Factbook, 2012) The emerging markets are the biggest potential customer bases for Blackberry where sales are increasing as the current income of the average households is increasing. iv) Balance of Payments A developing economy will tend to have a negative balance of payments and will have huge burden on its public expenditures, thus, companies such as Blackberry could harvest such opportunities by collaborating with the government and investing in infrastructure and other technological advancements. It is all about the positive image and the strong brand loyalty that the company can maintain. The stronger the brand performance, the better will be its referral rate and the greater will be its usage ratio. As the world emerges from the economic recession, its positive impacts would be seen on this market and Blackberry would be able to capitalize on such economic growth. v) Business Cycle Smartphone industry is expanding as the consumers are becoming more tech-savvy and want to be more style oriented. The business is, thus, in a growth stage where its sales are going to go up given it invests in the right smartphone devices and technology. As the company moves from the growth stage to the maturity stage, it will experience the highest economies of scales and, thus, will be able to sell its products at cheap prices compared to new competitors. Thus, the higher up in the business cycle Blackberry gets the better returns it will be able to produce. In order to ensure the economy maintains positive balance of payments the company will grow, but if the balance of payments is negative or below its optimum level, it will certainly deprive the economy of its reserves. This will put pressure on companies in the form of increased taxes, who will pass on this burden to the consumers as increased prices of Blackberry devices. Therefore, it’s all linked up within the bigger picture. The more money the ordinary consumer has the more he will be able to spend and contribute towards the positive growth of the company. The future is not bleak for Blackberry; nevertheless, the challenge is tough and only by applying a combination of unique strategies and harnessing first mover advantage would they be able to emerge again as a dominant power in the smartphone industry. References CIA World Factbook. (2012). [Online] Available at https://www.cia.gov/library/publications/the-world-factbook/ [Accessed16 March 2012]. Hall, B. (2011). A wee bit of good news for Blackberry. Mostly bad news for Android fragmentation. [Online] Available at: http://brianshall.com/content/wee-bit-good-news-blackberry-mostly-bad-news-android-fragmentation [Accessed 15 March 2012]. Miller, H. (2011). RIM cuts profit forecast as Blackberry demand falls short. Bloomberg [Online] Available at http://www.bloomberg.com/news/2011-04-28/rim-cuts-profit-forecast-as-demand-for-blackberry-smartphones-falls-short.html [Accessed 14 March 2012]. Evans, J. (2010). Iphone 4 demand explodes, Blackberry ain’t sexy. [Online] Available at http://blogs.computerworld.com/16529/survey_shows_apple_iphone_4_dominates_smartphone_sales [Accessed 15 March 2012]. Schnurr, L. (2011). U.S. economic growth seen brighter into 2012. Reuters. [Online] Available at http://www.reuters.com/article/2011/12/14/us-economy-usa-poll-idUSTRE7BD16420111214 [Accessed 14 March 2012]. Appendix Read More